Microsoft Buys LinkedIn
Michael J. de la Merced and Leslie Picker:
How generous is Microsoft’s takeover bid? It puts LinkedIn’s enterprise value at 79 times the social network’s earnings before interest, taxes, depreciation and amortization, or Ebitda, for the 12 months that ended on March 31.
On the basis of that multiple, the transaction is more expensive than any big internet deal paid with cash, according to data compiled by Bloomberg.
Microsoft is paying $220 for each of LinkedIn’s monthly active users. By comparison, when Facebook acquired WhatsApp for $19 billion two years ago, it spent $40 for every user.
LinkedIn builds a bridge for their productivity business to a new world centered around end users, not corporations, and it may even give Microsoft’s inevitable compete products a head start. Imagine this: instead of simply moving Active Directory to the cloud, Microsoft is potentially making LinkedIn the central repository of identity for all business-based interactions: chat, email, and more, and it’s an identity that endures for an end user’s professional life, because it’s managed by the user, not by their transient employer. It’s genuinely exciting, and shocking though it may have been, I think that’s worth $26 billion.
That’s a lot of money but it seems like an obvious fit. Also, Nadella was probably tired of getting all those LinkedIn emails.
Microsoft’s track record with multibillion-dollar acquisitions is, well, terrible. But why would Microsoft want to own the world’s second uncoolest social network — the first, of course, being Google+ — when it’s effectively a glorified and unprofitable résumé hosting service?
